Owning and operating a business has always been a dream for many Americans. For those in the accounting field, starting up a CPA firm can be a major challenge. The substantial upfront costs and the often slow rate of client acquisition means it can take years before reaching the break-even point. For this reason, many opt for the ‘fast track’ to profitability by purchasing an existing firm.
While buying an existing CPA firm offers several advantages over starting one from scratch, it does not always offer that pot of gold at the end of the rainbow. Done correctly, purchasing a CPA firm can give you the business you have always dreamed of. Done incorrectly, it can turn into a nightmare.
Here are some important considerations for those looking to buy an accounting firm in the near future:
Look for a Motivated Seller: When you are searching for a CPA practice to purchase, you are not likely to come across a “for sale” sign in front of the office. Sales of professional practices must remain discreet so as to not upset the employees and clientele. So to find someone motivated to sell, you will need to put the word out to your network and ask if there are any accountants that are looking to retire or change careers. It is critical that the owner actually wants to sell; otherwise you are likely to end up over-paying.
Look for a Compatible Practice: It is important in any merger or acquisition that you are acquiring assets that are compatible and/or complimentary to your own. This same principle applies to buying a CPA firm. You will need to analyze the employees, equipment, accounting systems, business philosophy, and other intangibles to determine if this firm will be a good fit for you. If it does not meet the compatibility test, then you will have a difficult time making it work even if the numbers are right.
Crunch the Numbers: Speaking of numbers, you will need to do an in-depth analysis of all of them; assets vs. liabilities, fixed and variable expenses, monthly revenue (current and historical), growth rate, and future growth opportunities. This will not be an easy process, but you must do you due diligence when it comes to crunching the numbers. Because at the end of the day, you must be reasonably certain that this purchase will afford you the standard of living you are seeking.
Work with a Business Broker: There are a number of ‘moving parts’ involved with the successful purchase of an accounting practice. For this reason, it makes good sense to work with a business broker that specializes in helping buyers locate CPA firms for sale. Working with a specialist will help ensure that you find the right firm to suit your needs and put you on the road to a successful transaction.
